Talking Points:
• US Vice President Pence clarified the United States' commitment to NATO and relationships to Europe
• Brexit debate started in the House of Lords with divisive view but little response from Pound, GBP/USD or the crosses
• Global PMIs and Fed speak will struggle for influence, liquidity will amplify risk trends and trade policy updates
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Liquidity proved the dominant force to start the new trading week as the absence of US traders further curbed the already tempered responsiveness of speculators. Though the was little movement on the risk, monetary policy and competitive trade front; we carried through notable developments on all three. For monetary policy, the significant rise in Fed rate forecasts and noteworthy slide in the Dollar last week still hangs over the market. Where most markets were still open through Monday's session, equities rode the week-ending drive from US shares Friday - but not taking the next step to further the cause.
It was the ever-belligerent trade policy views of the major market participants where the headlines were most prolific. US Vice President Mike Pence had visited Europe and brought a more conciliatory demeanor than President Trump. He specifically reaffirmed the country's commitment to critical political alliance with Europe via NATO and the Trans-Pacific relationship. Both economic partners and the market maintained a sense of skepticism with the reassurances however. Meanwhile, the gathering of the European Union financial leadership offered up a tame outlook for growth and cleared the hurdles for further discussion on Greece's support fund - with limited positive or negative response from the Euro. Brexit was also on the menu for Pound traders with the House of Lords starting a two-day debate on the government's approach to the negotiation. The rhetoric was not supportive of the Prime Minister's push, but that didn't phase the Pound.
As the US returns from a long holiday weekend and revives liquidity, the market will struggle to translate market depth into serious motivation. While there are notable events on tap, they will likely struggle to mount speculation on a self-sustaining course. For monetary policy, a round of Fed speakers will stir the same pot that the many speeches, Yellen testimony and US CPI data last week failed to boil. An update on global growth expectations will be set by February Japanese, Euro-area and US PMIs. As for the second day of the House of Lords Brexit debate and the ever-lurking threat of a US President policy shift, traders have proven remarkably sanguine to the risks. We weigh market conditions into the next trading session in today's Trading Video.
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